Still reeling from the aftermath of the U.K. elections? Well, here are a few more catalysts that could spur additional volatility for GBP pairs this week.
1. Inflation reports (June 13, 9:30 am GMT)
First up, we’ve got inflation readings due on Tuesday’s London trading session and analysts are expecting to see a meager 0.2% uptick in the May CPI reading, which should be enough to keep the annual figure unchanged at 2.7%.
The producer price index is also due around the same time and input prices could show a 0.3% decline, which could mean some downside pressure on overall inflation down the line as changes in costs for manufacturers are usually passed on to consumers.
However, weakening inflation ain’t exactly the worst thing for the U.K. economy these days. For the past few months, policymakers have been concerned that households are starting to feel the pinch from higher prices of basic goods, so lower than expected results might actually be a plus for the consumer sector.
Then again, a much higher than expected read could revive talks of tightening from the BOE as some officials have already pointed out the need to hike rates to keep inflation under control.
2. Jobs data (June 14, 9:30 am GMT)
Whether or not consumers can keep up with the gains in price levels hinges a lot on the employment situation. In April, the U.K. economy shed 19.4K jobs and is expected to have lost 20.3K positions in May, but the unemployment rate is still projected to stay unchanged at 4.6%.
Another important factor to take note of is wage growth as this directly influences consumer spending. Apart from that, a stronger than expected read would reflect persistent upside pressure on wages, which would be positive for inflation as well.
The average earnings index could show another 2.4% reading for the three-month period ending in April, and this would be lagging a few notches behind the estimated annual CPI figure of 2.7%.
3. Retail sales (June 15, 9:30 am GMT)
The retail sales report should provide a clearer picture on consumer behavior, although this one might have a subdued impact on pound price action since it comes a few hours before the highly-anticipated BOE decision.
Still, it’s worth noting that analysts are expecting to see a 0.8% decline in headline retail sales for May, erasing part of the 2.3% jump seen last April. Core retail sales could also print a 0.8% drop after posting a 2.0% gain in the previous month.
4. BOE rate decision and MPC minutes (June 15, 12:00 pm GMT)
Talk about saving the best for last! Traders are sitting tight for this particular BOE statement because it comes after the U.K. elections, which turned out to be a huge plot twist in the economy’s Brexit story.In their earlier policy statement, the BOE kept interest rates on hold as expected but there was one policymaker who actually called for a hike. According to lone hawk Kristin Forbes, inflation is already “rising quickly” and that there is very little downside risk to a rate increase.
Head honcho Carney also assured that “The factors currently weighing on wage growth are unlikely to persist,” and that they are expecting a “smooth Brexit” process to happen. Ha!
By the looks of it, policymakers had been expecting the U.K. government to have a united front in Brexit negotiations, which might not be the case now that a hung parliament situation is on its hands. At that time, Carney admitted that they haven’t come up with Plan B in case things get ugly, so market watchers are keen to find out how the central bank plans to steer the economy from here.
All in all, the upcoming releases are slated to show a gloomy economic situation for the United Kingdom, especially in light of the recent political limbo. Of course there’s always a chance that the numbers could reflect some form of “Keep calm and carry on” resilience, but the odds are that upbeat readings might simply spur a short-term bounce from the ongoing drop.